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Commentary

The Boss Tweets His Way Into Another Storm

Another tweet, another huge controversy. No, no, no. Not him. We’re talking Elon Musk, who out of the blue suggested via Twitter yesterday that he might take Tesla private at $420 a share, raising questions of market manipulation and securities fraud, as well as earnest inquires into exactly
what the outspoken CEO has been smoking.

“Tesla stock was trading at about $355 a share before Musk's tweet. It jumped about 5% after the tweet. But later in the afternoon, trading in the stock was halted pending an official
company announcement,” reports NPR’s Avie
Schneider.

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Indeed, “the tweet was the Wall Street equivalent of yelling fire in a crowded theater when there isn’t even any smoke. Many automatically assumed
Musk was joking as the share price he chose was a codeword for smoking marijuana, but
subsequent tweets showed he was serious,” writes Therese Poletti
for MarketWatch.

“While Mr. Musk continued tweeting about the possibility over the next few hours on Tuesday, Tesla’s public-relations team and main
Twitter account remained silent, adding to the intrigue. An hour before the market closed, while Tesla’s stock was halted on Nasdaq, Tesla on its corporate site published a memo it
said Mr. Musk sent to employees that confirmed his thinking,” write Mike Colias and Miriam Gottfried for the Wall
Street Journal.

“The reason for doing this is all about creating the environment for Tesla to operate best,” Musk says in the email. “As a public company, we are subject to wild swings in our stock price that can be a
major distraction for everyone working at Tesla, all of whom are shareholders.”

After disclosing that he owns about 20% of the company and would expect to retain a similar
interest should any deal transpire, Musk points out that the proposal to go private would be subject to the majority approval of shareholders.

“Musk, an erratic micromanager
infamous for his explosive leadership style, decided to announce the plan with his signature brand of chaos: via a nine-word Twitter message, fired off in the middle of the trading day and hours
before his company officially announced the plan,” write Drew Harwell and Renae Merle for
the Washington Post.

“What chaos,” said Teresa Goody, a former Securities and Exchange Commission official who now advises companies on securities law and
corporate governance, tells them. “It is not reasonable to expect investors to monitor and keep track of Elon Musk’s tweets.”

But that’s not all investors
were dealing with.

“Tesla’s stock was already up sharply on a report that Saudi Arabia was taking a sizable stake in the company. But investors were left to puzzle out
the implications of Mr. Musk’s proposition, its relationship to the Saudi report, and even the authenticity of the tweet. And so, starting at 12:48 p.m., the market that Mr. Musk threatened
to forsake went into a frenzy. At 2:08 p.m., with shares up more than 7% for the day, trading was halted …,” report Neal E. Boudette and Matthew Phillips for the New York Times.

Even before this latest social-media brouhaha, Zoë Chance, an assistant professor of marketing with Yale School of Management, suggested in an email that Musk has been
prone to employ a “dead cat strategy” of
late.

Dead catting is “doing or saying something shocking to distract from the substantive issues you’re being criticized for, so that this new topic
takes over the public sphere. Maybe you tweet about the size of your nuclear button, maybe your wife wears an ‘I DON'T CARE DO U’ jacket when kids are being taken from their parents, maybe
you call someone a pedophile when your company is in danger of
bankruptcy and you're being outed as a Republican.”

As for that stock surge, the buzz started to wear off this morning.

“Tesla shares edged
[1.2%] lower in pre-market trading Wednesday, following the stock's biggest one-day gain in nearly four years, as investors appeared to question founder and CEO Elon Musk's $72 billion vow to take his
iconic clean-energy car company private,” reportsMartin Baccardax for The
Street.

“Taking Tesla private at Musk's stated value would likely require the biggest leverage buyout in U.S. corporate history, a tactic that could prove incredibly
challenging for a company that burned through $740 million in cash each quarter, has an issuer credit rating of B3 at Moody's Investors Service, struggles under a $10.9 billion debt pile and has
consistently failed to meet its own production and delivery targets,” Baccardax points out.

As for Musk’s “funding secured” assertion in his initial
tweet, MicroCap Guru analyst Jim Collins was skeptical in
a Forbes commentary written in London this morning.

“From the non-existent public documents and the lack of information that merger arbitrageurs live for
— known as ‘rumortrage’ — it is very hard to take Musk’s tweets seriously. If his mission was to fry Tesla short-sellers, he certainly accomplished that, but if his
mission was to launch the largest leveraged buyout in history of mankind, well, he hasn’t even taken the first steps.”

If his mission was dead catting, on the other
hand …

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About the Author

Thom Forbes was editorial director of Adweek and its sister publications in the 1980s and has written about marketing and media as a freelancer since 1990.